February 14, 2009

 

 

Sanlu Group's assets will be auctioned on March 4 following Chinese courts' orders on its involvement in a melamine - milk contamination scandal last year.

 

The mandate was issued by the Intermediate People's Court of Shijiazhuang, capital of north China's Hebei Province, with a joint statement by the Hebei Jiahai Auction Co. Ltd., Hebei Dongfang Auction Co. Ltd. and Hebei General Auction Co. Ltd..

 

Sanlu Group's land use rights, buildings, machines and equipment will be up for bidding.

 

Assets also include Sanlu Group's investment rights and interests over three other dairy companies.

 

The court also declared the company bankrupt Thursday (February 12), as Sanlu failed to repay outstanding debts, which surpassed its assets. It met the conditions for bankruptcy, according to the court order.

 

Sanlu Group has 274 creditors, the largest being Sanlu Business and Trade Company, a wholly-owned subsidiary of the group itself. The other creditors include banks, distributors and suppliers.

 

On December 19, the company borrowed 902 million yuan (US$132 million) to pay medical fees of children who fell ill by baby formula tainted with melamine and to compensate victims, which increased its debt to 1.1 billion yuan.

 

Beijing Sanyuan Foods Co. Ltd., a potential buyer of Sanlu's assets, said it was watching developments closely.

 

Sanlu leased its plants to a subsidiary of Beijing Sanyuan Foods Co. Ltd.-a potential buyer of Sanlu'sassets-- in December, days after the bankruptcy petition was accepted by the Shijiazhuang Intermediate People's Court.

 

Sanlu stopped production on September 12 after its melamine-tainted baby milk powder was found to have caused the deaths of at least six children and sickened more than 300,000 other children.